Correlation Between Boston Properties and Douglas Emmett

Can any of the company-specific risk be diversified away by investing in both Boston Properties and Douglas Emmett at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Boston Properties and Douglas Emmett into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Boston Properties and Douglas Emmett, you can compare the effects of market volatilities on Boston Properties and Douglas Emmett and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Boston Properties with a short position of Douglas Emmett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Boston Properties and Douglas Emmett.

Diversification Opportunities for Boston Properties and Douglas Emmett

0.77

Correlation Coefficient

Boston Properties  Douglas Emmett

Poor diversification

The 3 months correlation between Boston and Douglas is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Boston Properties and Douglas Emmett in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Douglas Emmett and Boston Properties is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Boston Properties are associated (or correlated) with Douglas Emmett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Douglas Emmett has no effect on the direction of Boston Properties i.e., Boston Properties and Douglas Emmett go up and down completely randomly.

Pair Corralation between Boston Properties and Douglas Emmett

Considering the 90-day investment horizon Boston Properties is expected to generate 1.73 times less return on investment than Douglas Emmett. But when comparing it to its historical volatility, Boston Properties is 1.12 times less risky than Douglas Emmett. It trades about 0.14 of its potential returns per unit of risk. Douglas Emmett is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,561  in Douglas Emmett on August 31, 2024 and sell it today you would earn a total of  375.00  from holding Douglas Emmett or generate 24.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Boston Properties  vs.  Douglas Emmett

Boston Properties

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Properties are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Boston Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Douglas Emmett

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Douglas Emmett are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Douglas Emmett demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Boston Properties and Douglas Emmett

The main advantage of trading using opposite Boston Properties and Douglas Emmett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boston Properties position performs unexpectedly, Douglas Emmett can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Douglas Emmett will offset losses from the drop in Douglas Emmett's long position.

The idea behind Boston Properties and Douglas Emmett pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.